Lenovo Announces Fourth Quarter and Full Year 2016/17 Results

Lenovo Group today announced results for its fourth fiscal quarter and
full-year ended March 31, 2017. In what was a year of significant
transformation, Lenovo made good progress in implementing and executing
its new “three-wave strategy,” designed to meet the critical business
challenges of today, while positioning the Company for continued
long-term profitable growth.

As part of Lenovo’s transformation, the Company put in place an
aggressive new end-to-end ownership model to manage each business
differently, led by strong new leaders, and is seeing improvements as a
result.

“Despite challenging market conditions, Lenovo saw revenue resume to
growth in the fourth quarter, after five quarters of decline,” said Yang
Yuanqing, Lenovo Chairman and CEO. “To drive further growth, we have
clearly defined the three-wave strategy. We will maintain PC leadership
in scale, profitability and innovation in the first wave, while building
our second wave, mobile and data center businesses into growth engines.
Simultaneously, we will execute our third wave of 'Device + Cloud' and
'Infrastructure + Cloud' to capture the opportunities brought by new
technologies. With this new strategy, we are confident to achieve long
term, sustainable growth.”

For the fourth fiscal quarter, Lenovo’s revenue was US$9.6 billion, an
increase of 4.9 percent year-over-year, fueled in part by a good
performance in the PC/smart devices and mobile businesses. For the
full-year ended March 31, 2017, Lenovo’s revenue was US$43 billion, down
4.2 percent year-over year.

The Company’s gross profit for the fourth fiscal quarter decreased 9.8
percent year-over-year to US$ 1.4 billion, while for the full year,
gross profit fell 7.8 percent to US$6.1 billion. Operating profit for
the fourth fiscal quarter was US$74 million. For the full year, Lenovo’s
operating profit was US$672 million. Fourth-quarter net income was
US$107 million, while net income for the full year was US$535 million,
an increase of US$660 million year-over-year.

Basic earnings per share in the fourth fiscal quarter was 0.97 US cents
or 7.56 HK cents, and for the full year basic earnings per share was
4.86 US cents or 37.71 HK cents. Lenovo’s Board of Directors declared a
dividend of 2.63 US cents, or 20.5 HK cents per share for the fiscal
year ended March 31, 2017.

Business Group Overview

In our PC and Smart Devices (PCSD) business group, which includes
PCs, tablets and smart devices, Lenovo’s quarterly sales were up 4.9
percent year-over-year to US$6.7 billion. Quarterly shipments grew one
percent to 14.4 million, four points better than the overall market.
Pre-tax income for the quarter was US$288 million, a decrease of 4.7
percent year-over-year.

For the full year ended March 31, 2017, Lenovo’s PCSD sales were down
2.3 percent but beating the overall market, at US$30 billion. Shipments
for the year beat the market significantly by 7.1 points, with 66.6
million, while pre-tax income margin stood at five percent, a slight
increase year-over-year.

Importantly, Lenovo continued to deliver strong results in both the
fourth quarter and full year in the hyper-growth categories in this
business, such as gaming, detachables, Chromebooks and Millennial PCs
(in China). For example, our gaming and Chromebook shipments were up
20.5 and 38.2 percent respectively in the fourth quarter. Meanwhile our
detachables grew at a double digit premium compared to the market, and
Millennial PC continued its rapid rise in China with triple digit growth
for the fourth quarter in a row.

Lenovo’s Mobile Business Group (MBG), which includes Moto and
Lenovo-branded smartphones, saw 19.7 percent revenue growth in the
fourth fiscal quarter outside of China, with total sales of US$1.7
billion. Fourth quarter smartphone shipments increased 17.4 percent to
11.3 million units outside China, beating the market significantly by
12.8 points.

For the full year ended March 31, 2017, overall sales were down 5.4
percent and pre-tax income margin decreased 1.9 points outside China.

In Asia Pacific and Latin America, led by our success in India and
Brazil respectively, Lenovo’s mobile business continued to improve
throughout the year. In Western Europe, shipments were up in France,
Germany and the UK, while in North America, our channel expansion plans
are on track.

In China, we have added new leadership, re-aligned our strategy and
product portfolio, and cleared our inventory as we get ready to
introduce a new product lineup.

In our Data Center Group (DCG), which includes servers, storage,
software and services, fourth fiscal quarter sales were down 13.7
percent year-over-year, to US$850 million. For the full year, revenue
decreased 10.6 percent on total sales of US$4.1 billion.

We have re-engineered this business by adding new leaders including
industry veterans, deploying a dedicated DCG sales force in all
geographies, and forming new segments to focus on growth categories such
as high-performance computing. We are the fastest-growing supercomputer
company in the world, and the #1 supercomputer company in China. We are
also focusing more resources on our Global accounts where we grew 16
percent year-over-year, and are confident we now have the right strategy
in place to help deliver on our turnaround, particularly in mature
markets.

Geographic Overview

In China, in the fourth fiscal quarter, Lenovo’s consolidated
sales were US$2.3 billion, a decrease of three percent year-over-year.
For the full year, China sales were down 4.6 percent to US$11.8 billion.
For the quarter, China sales were 23.8 percent of the Company’s total
worldwide sales, and for the full year, China sales were 27.4 percent of
the total.

Pre-tax income in China was US$64 million during the fourth quarter, and
for the full year fell 4.3 percent to US$539 million. Pre-tax income
margin held flat for the year at 4.6 percent.

In Asia Pacific, Lenovo’s sales were 18.1 percent of the
Company’s total worldwide sales during the fourth fiscal quarter, and
16.3 percent for the full year. Consolidated sales in the fourth quarter
increased year-over-year by 9.4 percent to US$1.7 billion and for the
full year decreased by two percent to US$7 billion. Pre-tax loss for the
full year was $65 million.

In Europe, Middle East and Africa, consolidated sales in the
fourth fiscal quarter were up 5.9 percent year-over-year to US$2.6
billion. For the full year, sales were US$11.2 billion, a decrease
year-over-year of 5.1 percent. EMEA sales were 27.4 percent of the
Company’s overall fourth quarter sales, and 26 percent of total
worldwide sales for the full year.

In the Americas, consolidated sales grew to US$2.9 billion, 30.7
percent of the Company’s total sales for the quarter, and a healthy 8.2
percent increase year-over-year. For the full year, sales were down 4.1
percent year-over-year to US$13 billion, or 30.3 percent of total
worldwide sales.

Pre-tax income for the fourth quarter was US$60 million, a seven times
improvement year-over-year, and a pre-tax income margin improvement of
1.7 points. For the full year, pre-tax income more than doubled to
US$157 million, with pre-tax income margin improving 2.1 points to 1.2
percent.

About Lenovo

Lenovo (HKSE: 0992) (OTC Pink: LNVGY) is a US$43 billion global Fortune
500 company and a leader in providing innovative consumer, commercial,
and enterprise technology. Our portfolio of high-quality, secure
products and services covers PCs (including the legendary Think and
multimode YOGA brands), workstations, servers, storage, smart TVs and a
family of mobile products like smartphones (including the Moto brand),
tablets and apps. Join us on LinkedIn,
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or visit us at www.lenovo.com.